Introduction to this report:

The revenue share for the first three quarters was relatively small. Short-term performance fluctuations did not change the trend throughout the year, and the business continued to break through with new customers and new fields

Key points of investment:

The target price was raised to 23.53 yuan to maintain the “gain” rating. Considering the low share of revenue in the first three quarters for the whole year, the full-year performance forecast will not be adjusted due to fluctuations in single-quarter results. The company's EPS in 2024-2026 was 0.77, 0.96, and 1.14 yuan respectively. Referring to the comparable company's PE of 24.51 times in 2025, the company's target price was raised to 23.53 yuan to maintain the “gain” rating.

Q3 revenue was lower than expected, but the impact on full-year results was limited. In the first three quarters of 2024, the company achieved revenue of 0.294 billion yuan, an increase of 5.86% over the previous year. Among them, Q3 achieved revenue of 0.102 billion yuan, a year-on-year decline of 18.60%, and revenue lower than expected. We think the main reason is that the company's order scale is large, and the problem with the pace of confirmation of large orders across time periods affects the current revenue growth rate. Judging from data from previous years, the company's revenue for the first three quarters did not account for more than 40% of the year. Most of the revenue came from Q4, so fluctuations in revenue growth in a single quarter did not change the positive trend throughout the year.

Gross margins are under pressure, and cash flow has clearly recovered. During the reporting period, the company's consolidated gross margin was 35.96%, down 7.01 pct from the same period last year. Mainly because the company has entered multiple fields, the competitive pressure has increased, and the difficulty of project implementation has increased, and it faces both pressure on the revenue and cost side. Based on this, the company is also actively seeking changes on the cost side to reduce the impact of expenses on the income statement. At the same time, the company has strengthened the collection of accounts receivable. During the reporting period, it received 0.402 billion yuan in operating cash, an increase of 36.24% over the previous year. Sufficient cash reserves have laid a solid foundation for the company to increase investment in R&D.

Continuing to expand new customers and new fields, we are expected to usher in breakthroughs in the context of Xinchuang. Using treasury construction as a breakthrough, the company continues to dig deeper into other business scenarios for strategic customers, and actively break through in the fields of group budget management and financial sharing. Furthermore, in the financial sector, the replacement for OracleEBS is expected to be launched within the year, or it will continue to open up room for growth in the Xinchuang business as a benchmark project for domestic replacement of the financial industry's general ledger module.

Risk warning: the risk of fluctuations in the macroeconomic environment, the risk that Xinchuang will not advance as expected.